A Plan For Parental Leave
by Abby M. McCloskey, National Review, May 23, 2016, Issue
With Hillary Clinton as the Democratic nominee, paid maternity leave will be a big issue in the general election and beyond.
Republicans have a choice to make: They can either stand on the sidelines shouting “No” and be passed by, as they were in the Obamacare debate, or they can be the architects of a thoughtful maternity-leave policy that works for new mothers, employers, the federal budget, and the economy.
The United States is the only country in the developed world without a national paid-maternity-leave program. The Family and Medical Leave Act of 1993 mandates that employers offer twelve weeks of job-protected leave to workers for family-related issues. But 40 percent of working women are ineligible, owing to the act’s various restrictions. Moreover, because it is unpaid, many mothers cannot afford to take this leave even if they are eligible to do so.
Many companies in the United States offer paid-leave benefits, sometimes on incredibly generous terms, especially in the tech world. But only 12 percent of private-sector workers are granted paid leave by their employers, according to a recent Department of Labor study. This drops to 5 percent for employees in the bottom income quartile.
As a result, many working mothers cobble together vacation days, sick leave, and disability when they need to recover from childbirth. And even then, a significant gap remains: In the 2006–08 period, approximately half of first-time mothers gave birth without any form of paid leave from their employer for any duration of time, and only 10 percent claimed disability insurance, according to the Census Bureau.
Lack of paid leave is a problem especially for low-income mothers, who often don’t have the savings needed to carry them through months in which they earn nothing; for single mothers, who have no family income other than their own to rely on; and for the four in ten American mothers who are their household’s main breadwinner, according to Pew Research Center.
The lack of paid maternity leave appears to be more of a bug than a thought-out feature of America’s safety net. The government provides benefits for workers temporarily out of work because of a disability or unemployment, but not for those out of work because of childbirth. It makes little sense that a woman who is laid off from her job can receive unemployment-insurance payments for 26 weeks, or that a woman who reports back pain can receive disability payments indefinitely, but that a new mother in her early weeks of recovery receives no benefits.
Democrats have tried to close the paid-leave gap in two main ways. First, they have tried to mandate that companies provide it — President Obama’s preferred method for everything. In 2015, Obama signed a memorandum ordering agencies to give federal workers six weeks of paid leave to care for a new child or take care of ill family members.
Second, Democrats have tried to create new paid-leave programs. Three states — California, Rhode Island, and New Jersey — have implemented such programs, funded by higher payroll taxes, and New York recently passed a law establishing one. And on the federal level, Senator Kirsten Gillibrand (N.Y.) and Representative Rosa DeLauro (Conn.) have proposed the Family and Medical Insurance Leave Act (Family Act), which would provide up to twelve weeks of paid family leave (which covers any family-related caretaking situations), also funded by payroll taxes. The president has also called on Congress to pass a federal law guaranteeing up to seven days of paid sick leave, including leave for family care.
But both of these methods could hurt working women more than help them. Government mandates increase employers’ costs, which have to be made up somewhere. This is why mandating benefits or requiring a certain level of wages typically is accompanied by lower wages and less hiring, especially among low-skilled workers (who tend to be women). And there is substantial research showing that higher taxes on work tend to reduce women’s labor-force participation disproportionately. At a time when women’s work-force participation has plateaued, raising taxes should be approached with extreme caution.
While proponents of paid-leave policies often argue that the payroll-tax hikes involved would be minimal (for example, an increase of 0.4 percentage points under the Family Act), there’s reason to be suspicious. When the American Action Forum analyzed the Family Act, it found that, annually, the proposed payroll tax would raise only $30.6 billion while costing anywhere from $159.6 billion to $997.4 billion. In other words, taxes would need to increase by a lot more than estimated, which would be bad news for working women.
It’s time for a conservative approach. After all, conservatives are generally pro-life and pro-family, and research shows that paid leave results in better maternal healing and improved child health. Conservatives also generally support economic opportunity and self-sufficiency.
To that last point, studies have found that paid leave increases work-force participation for new mothers. Economists Christopher Ruhm and Jacqueline Teague found that moderate paid-leave periods are associated with higher labor-force-participation rates for women than is unpaid leave. Evidence from California’s paid-leave program suggests that the weekly work hours and wages of new mothers rose by 10 to 17 percent, probably because more women kept their jobs rather than quitting them and seeking new ones once they were ready to go back to work.
To the extent that more work-force participation leads to higher earnings — especially for low-skilled workers — it could reduce recourse to public assistance in the long run. There’s growing evidence to support this possibility. A 2012 study by Rutgers, “Pay Matters,” found that — holding income, job quality, age, education, and other factors constant — paid leave reduces a woman’s likelihood of using food stamps by 40 percent in the year following her child’s birth.
Recently, Republicans have tried to tackle paid leave through the tax code. In 2015, Marco Rubio became the first GOP presidential candidate to put forward a paid-leave plan, providing a 25 percent tax credit to encourage companies to offer paid leave of up to twelve weeks or $4,000. This proposal was modeled on the Strong Families Act, coauthored by Senators Deb Fischer (R., Neb.) and Angus King (I., Maine). And the Independent Women’s Forum, a right-leaning women’s group, recently called for the creation of pregnancy savings accounts akin to health savings accounts (funds into which workers can currently contribute $30,000 tax-free over their lifetimes).
To be sure, either of these programs would be an improvement over the status quo. But there are two potential problems with attempting to solve the paid-leave problem through the tax code only. First, tax credits or tax shelters are a form of government spending; it’s just hidden spending. Second, it’s possible that this spending would be unnecessary. It’s possible, for example, that those who would contribute to pregnancy savings accounts are saving already, or that companies that would receive the tax credits already offer paid leave. Some type of restrictions would have to accompany these reforms to ensure that they’re not duplicative. Moreover, because low-income households typically don’t have to pay income taxes, the pregnancy savings accounts would probably be more of a middle-class benefit than something truly aimed at helping the poor, unless the government contributed to the accounts.
There is another way: The government could provide a universal maternity-leave benefit, which would be of help mainly to new mothers whose employers do not offer paid leave. But instead of paying for it through higher taxes or more federal debt, we could raise the money from reforming our existing social safety net.
If structured properly, a government-provided maternity-leave benefit need not be very costly. By my calculations, if the government provided six weeks of paid maternity leave (the duration provided to workers in Obama’s White House) to working mothers without paid leave from their employer, this would cost approximately $2.5 billion, assuming that each mother received $300 weekly, the average value of an unemployment check. (For perspective, consider that this is 1 percent of what was spent on disability insurance and the associated medical benefits in 2012, and just over 2 percent of what was spent on unemployment benefits in that year.)
The amount of the benefits should be set low enough, and the duration made short enough, that they function as a true safety net for working mothers without other options. Otherwise, it might become attractive for employers to drop their existing paid-leave policies, and extended periods of paid leave might reduce a mother’s future earnings potential (although this typically tends to occur only with a year or more of leave).
There is understandable pushback from fiscal conservatives when any new government program, even a small one, is proposed at a time of historic levels of government spending. But this cannot be a reason to block all new programs regardless of their merits. And the proposal outlined here compares favorably with liberal alternatives, which do not countenance any reduction in spending on existing programs to pay for maternity leave.
The paid-leave debate should be the impetus for a review of our entire safety net (including entitlements), with a view to modernizing it. The U.S. has been accumulating benefits programs for the past 80 years, without any comprehensive overhaul — save for the 1996 welfare reform — despite dramatic changes in family structures and the economy. The result is a chaos of programs that are failing America’s poorest families, are increasingly directing benefits toward the middle class, and are fiscally unsustainable.
Conservatives should take the lead in prioritizing deserving programs and cutting ineffective ones. There’s a strong case to be made that providing a minimum level of support for new mothers who are unable to work in the early weeks of recovery should qualify as a basic element of the safety net, while tripling the disability rolls or providing Social Security benefits to millionaires might not.
A majority of Republican voters (55 percent) support paid leave for new parents, as do two-thirds of the American public, according to a recent AP-GfK poll. Instead of shying away from paid leave, conservatives should articulate the shortcomings of the Democratic approach and present America with a better alternative. – Abby M. McCloskey is an economist and the founder of McCloskey Policy LLC. She previously served as the policy director for Rick Perry’s presidential campaign and an adviser to Jeb Bush’s presidential campaign.